Business is good: RUSAL CEO Oleg Deripaska
Today the UK Financial Times newspaper confirmed what the Kommersant newspaper reported Monday - two Russian firms, SUAL and RUSAL, are being merged to create the largest aluminum producer in the world, combining for 11% of global production. The deal is reportedly worth $30 billion dollars, though the exact terms of the merger are still being negotiated, reportedly with the advice of the JP Morgan and UBS multinational investment banks. According to the Bloomberg story, RUSAL will form 75% of the combined company with SUAL getting the rest.
Russia Blog readers may recall seeing the face of Oleg Deripaska, the 38 year-old CEO of RUSAL in our post about the 32 Russians featured on Forbes's list of the 100 richest individuals on the planet. The megadeal means that Mr. Deripaska, the 6th richest man in Russia, is now a full partner with the 4th wealthiest Russian, Viktor Vekselberg. Besides acquiring state assets and taking the personal risk of competing with many rivals in the metal business, Mr. Deripaska also built up his fortune through his successful reorganization of GAZ, the old Soviet manufacturer of jeeps and Volga sedans.
However, unlike many of his other fellow oligarchs who didn't "share" and have been banished, Mr. Deripaska was able to successfully navigate the difficult transition from the roaring 1990s (Deripaska's father-in-law is married to one of Boris Yeltsin's daughters) to the new Kremlin regime. This means that Deripaska "shared" some of his wealth and did not break the iron rule that Khodorkovsky did (trying to sell the means of raw materials production to foreigners). Now Deripaska is getting his reward for playing by the rules: once the time arrived to marry Rusal's production facilities with Susal's abundant Siberian metal deposits, Putin was on hand to officiate.
Oleg Deripaska reportedly received President Putin's blessing for the deal
From the Bloomberg story:
Putin met Deripaska three weeks ago, one of the Russian leader's regular gatherings with the country's most powerful businessmen. Rusal's owner was added yesterday to the committee organizing Russia's bid to host the 2014 Winter Olympics in the Black Sea resort of Sochi.
`We expect and hope that Mr. Deripaska will take the combined company public,'' said Vladimir Zhukov, senior analyst at Alfa Bank in Moscow. ``He'll make much more money having his company public.''
As one of my friends here in Seattle who used to trade aluminum reminded me, metals (like oil and gas) can be highly violatile commodities. It will be interesting to see if Russia's newest "national champion" of raw materials is as successful in attracting investors to its IPO as Rosneft was last month.
SUAL's Krasalkor aluminum plant in Krasnoyarsk, Siberia
Adding to the anticipation of the IPO, The Moscow Times is reporting speculation that Roman Abramovich, the oligarch who cashed out last year by selling his oil company Sibneft to state-owned Gazprom, could be a major investor in the new Rusal. Exuberant industry analysts are already comparing the new Rusal to Australian natural resources major BHP Billiton, while Gazprom executives dream of having a bigger market cap than Exxon. Only time will tell if the Kremlin's national champions model will work, but for now, it has given foreign investors some sense of stability and brought vast amounts of the oligarchs' money back home to Mother Russia.